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Income Tax Appellate Tribunal, DELHI BENCH ‘H’ NEW DELHI
Before: SHRI H.S. SIDHU & SHRI L.P. SAHU
ORDER
Per L.P. Sahu, Accountant Member:
This is an appeal filed by the Revenue against the order of ld. CIT(A), Ghaziabad dated 18.10.2010 for the assessment year 2005-06 on the following revised grounds of appeal : “
1. That the Ld. CIT(A) has erred in law and on facts and circumstances of the case by ignoring the magnitude of transactions/Turnover in the shares made by the assessee, which is much beyond the magnitude of investment made by a common prudent investor. (Raja Bahadur Visheshwar Singh and others vs CIT(SC) 41 ITR 685).
2. That the Ld. CIT(A) has erred in law and on facts and circumstances of the case by ignoring that the motive of the assessee is apparent from his practice of very frequent buying and selling shares for profit resulting in business income & not for earning dividends as a common prudent investor does by holding back his shares for higher dividend and resulting capital gain. 3. That the Ld. CIT(A) has erred in law and on facts and circumstances of the case by ignoring that the nature of assessee of concealing the business income of dealing in shares is apparent from his frequent transaction in succeeding year also which have been made in hundreds of crores of rupees with clear motive of earning business income.”
2. The brief facts of the case are that the assessee filed its return of income on 31.10.2006 declaring income of Rs.2,37,431/- which was processed u/s. 143(1). Later on case was selected for scrutiny u/s. 143(2). Notice was issued and served upon the assessee along with questionnaires and the assessee made reply thereof. The Assessing Officer noticed from the details of share transactions given by assessee that the assessee has shown purchase and sale of shares and the profit earned thereon was claimed as short term capital gain, as the period of share holding was for less than 12 months. The Assessing Officer observed that the period of share holding was very less and the share transactions were for very huge amounts, except the shares of MRPL, ONGC and Jain Studio which works out to Rs.43,939/-. The AO, therefore, treated the other share transactions of Rs.40,96,602/- as business income and added the same to the total income of the assessee. The assessee preferred appeal before the ld. CIT(A) and the ld. CIT(A) deleted the addition on the basis of circular No. 4/2007 dated 15.06.2007 and the ratio of case laws cited. He accordingly held that the assessee could be treated only as an investor. Aggrieved by the impugned order, the Revenue is in appeal before the Tribunal.
The ld. DR relied on the order of the Assessing Officer and submitted that the ld. Assessing Officer has analysed the quantum of transactions made by the assessee during the year. The assessee has shown huge share transactions in a very short period. The AO has passed the reasoned order, which needs no interference. The ld. DR referred to the circular No. 02/2007 dated 15.06.2007, para 8 & 9 as referred by the AO also.
None is present on behalf of the assessee nor any adjournment application has been received. We, therefore, have no option except to decide the appeal of the Revenue exparte qua assessee after hearing the submissions of the ld. DR.
After considering the submissions of the ld. DR and the material available before us on record, we find that the order of the ld.CIT(A) does not call for any interference. The issue in dispute has been decided by the ld. CIT(A) vide para 3 page 17 to 19 of the impugned order. For the sake of convenience, the relevant para 3 is reproduced as under : (3) Ground No.3: Regarding the main issue i.e. short term capital gain vs. business income on purchase and sale of shares; I agree with the contentions raised by the appellant. It is verified to be correct that the assessee is a regular Income Tax assessee for many years. The assessee has been showing investment and consequent capital gain on purchase and sale of shares in earlier years also. It is also verifiable that during last year the assessee used to invest much lesser amount; it is only during this year that he has invested a larger sum; the source of which fund is verified to be an advance of Rs. 1.90 crores received on account of earnest money against sale of his land (capital gain has been declared in the next year on such sale of land). Confirmation for such advance received is also on record.' Thus the sudden spurt in the quantum of transaction is clearly because of huge inflow of explained money. Considering the past trend, it is apparent that assessee has' invested this money into share market; intention being to maximize the return by rotating investments. It is also verified that the assessee has earned and shown dividend income on various shares held by him. More importantly, the assessee has maintained two accounts; wherever shares have been purchased and sold without physical delivery, the appellant has himself declared the same as income from speculation. In respect of short term capital gain, the shares have been purchased and sold on the basis of physical delivery taken and given, getting them transferred in his name, in his demat account, making the payment for purchases and thereafter receiving the payment whenever sold. I agree with appellant's arguments that the referred Circular No.4/2007 is actually on a different subject matter being in relation to FI and big group investors. However, even if the ratio of these principles are applied; then also the appellant can be treated only as an investor. The appellant has always shown closing stock as investment combined with the fact that he has invested his own capital and has not borrowed any money. The case laws cited by the appellant are also directly relating to and in favour of the appellant's case.
Thus, on the basis of above discussion, I hold that the AO was not correct in assessing short term capital gain of Rs.40,96,602/- as business income. Ground No.3 accordingly succeeds.”
In view of the discussion, made in the impugned order, we are of the considered opinion that the ld. CIT(A) has rightly treated the profit earned on purchase and sale of shares as short term capital gain. There is nothing on record to rebut the stand of the assessee that the business was being carried on for last 25 years and in the previous year lesser amount was invested in shares. However, during the year under consideration, the assessee received Rs.1.90 crores as advance for sale of land and therefore, he invested his money for growth purpose and earned dividend for Rs.2,18,369/-. The ld. DR could not adduce any contrary material to disturb the findings reached by the ld. CIT(A) in the impugned order. We, therefore, find no good reason to interfere with the impugned order of ld. CIT(A). Accordingly, the appeal of the Revenue has no merits and is liable to be dismissed.